FTSE in-depth: Argos dogged by rotten sales

By Geoff Foster for MailOnline
Updated: 03:01 EDT, 15 June 2011

Any historian will tell you that in Homer's Odyssey, Argos was Odysseus' faithful dog.

Correction, Argos is the dog in Home Retail's empire.

The catastrophic catalogue group saw likefor-like sales plummet almost 10pc in the first-quarter following a significant decline in the consumer electronics market.

Its dire performance led analysts to slash full-year earnings forecasts for the entire group and prompted renewed heavy selling of the shares which dropped to a 52-week low of 164.5p.

Down around 27pc over the past month, the shares yesterday attracted speculative support on revived talk of a possible £2.23bn or 275p a share cash bid from American retail giant Wal-Mart, which owns UK supermarket group Asda. The close was 8.3p higher at 174.65p.

Recent reports that Asda was setting up a mergers and acquisition team of up to 55 staff in London to drive expansion in Europe, fuelled speculation that Home Retail could be on its radar.

Rumours doing the rounds certainly suggested that Home Retail's continued disappointing profits performance has served to increase Wal-Mart's determination to put Home Retail out of its misery.

Analysts say that Home Retail's 14.7p dividend, paid for the past four years, is now under threat. Espirito Santo forecasts a 35% cut in 2012 and has reiterated its sell recommendation. It also cut its fair value price to 140p from 180p.

So, with the prospect of seeing their dividend income flushed down the toilet over the next year or so, Home Retail's leading shareholders led by Schroders (14.9%), and Blackrock (7.4%), would surely not say no to any mouthwatering cash offer from Wal-Mart, or come to think of it, from anyone else.

B&Q retailer Kingfisher added 6.2p to 274.75p on hopes that tomorrow's AGM will be upbeat. Dealers recently heard that first-quarter profits had risen 10% to £74m with sales of garden furniture and patio sets boosted by April's warm weather.

China's robust industrial production report suggesting a measured slowdown in the world's second biggest economy and slightly better-than-expected US retail sales left the Footsie 29.67 points higher at 5,803.13. Wall Street moved back above 12,000 with an early gain of 128 points.

Struggling broadcaster ITV featured with a gain of 2.85p at 68.225p. Clients of Liberum Capital were probable buyers after the broker said the 33%-plus fall from the year's peak is overdone. Its balance sheet gives it the option to return significant levels of cash to shareholders giving double-digit earnings growth.

Following an HSBC upgrade to overweight, asset manager and private banking group Schroders rose 60p to 1587p. BT rang up a gain of 5.1p to 200.45p after Credit Suisse lifted its target price to 220p from 200p.

Oil infrastructure firm Petrofac jumped 41p to 1570.5p following a bullish Capital Markets Day presentation.

Management said it plans to double its earnings in the next five years by building up the part of its business which provides services to help develop oil reserves. It expects substantial growth to come from the newly formed Integrated Energy Services division.

Shares of Imperial Tobacco were dragged another 46p lower to 2010.5p on further consideration of the group's first profits warning since demerging from Hanson 15 years ago. It blamed a price war in the Spanish cigarette market.

Hoping to clean up at Royal Ascot, which this week is celebrating its 300th anniversary, betting firms made steady to firm progress. Betfair galloped 23.5p ahead to 856p, Ladbrokes cantered 2.1p forward to 149.15p and William Hill 1.8p to 220.45p.

Fading bid hopes left Northumbrian Water 8.8p easier at 378.1p. Super rich sources in Abu Dhabi apparently could not reach an agreement with the group's major 26.7% shareholder Ontario Teachers and have walked away. Persistent small buying on the back of a recent Panmure Gordon buy note lifted Gable Holdings 1.25p up at 21.63p.

Excellent full-year results helped Park Group climb 2.5p to 47p. Profits and the dividend were up over 30% and there was a strong uptake of prepaid card flexecash by High Street retailers.

The UK provider of gift vouchers and prepaid cards recently announced a deal with the Daily Mail to supply prepaid cards for its 'Rewards' giveaway promotion. Arden raised its target price to 63p from 50p.

Sable Mining edged up 0.5p to 20p following the acquisition of an 80pc interest in a permit on the Mount Kakoulima complex in Guinea, which is prospective for nickel, copper, cobalt, chromium and platinum.